From the moment we enter high school we are told going to college is the only lucrative path to success in adulthood. What many people don’t talk about is the staggering debt you might have to take on during this journey. Since 1999 student debt has increased a whopping 500%, yet wages have stagnated. In addition to that, tuition has been increasing at four times the rate of inflation.
One can never escape their student loan debt. Student loan debt is one of the few types of debt that can only be evaded by death, in most cases. The government and private lenders will garnish your wages, your tax returns and your future spouses’ wages if they have to. They can take your house and if you have a co-signer, their wages and tax returns, too!
If you default on any type of student loan your credit is ruined. That means jeopardizing future opportunities at better paying jobs, because as we know, employers check credit scores and some base hiring decisions on that number.
In some states you can even lose your professional license to practice the very profession you “paid” to get into in the first place. In 2011, 42 registered nurses in Tennessee lost their nursing licenses because they defaulted on their student loan payments.
If you are one of the estimated 40 million American students who hold some type of college loan debt then read on for tips to navigate through the student loan riddles.
Government Vs. Private Lenders:
Borrow federal first. Federal loans are cheaper, more available and have better repayment terms than private student loans. The unsubsidized Stafford and PLUS loans are available without regard to financial need, so you don’t have to be in a lower income bracket to qualify.
Private loans should only be borrowed if federal loans do not cover the full cost. If your private loan is not repaid under your name, it may be transferred to your remaining family members.
Here are a few guidelines to follow to ensure you don’t find yourself drowning in student loans:
- Don’t have Champagne taste on a Kool-Aid budget! Live like a starving student while you are a student so you don’t have to after you graduate.
- Do not borrow more for your degree than you expect to earn for your starting salary. For example, if the entry-level salary for your chosen profession is $32,000 per year, don’t borrow more than that.
- Submit the FAFSA every year.
- Apply for as many scholarships as you can.
- Consolidate your loans if possible.
- Always keep in touch with your lender.
- If you have passed your six-month grace period and are still finding yourself jobless, that’s ok. Communicate with the lender and explain the situation. They will work with you to set up a payment plan, even if it’s ten dollars a month. Ignoring them is the worst thing you can do for yourself and your future.